Purpose and Scope

“In Aas v. Superior Court (2000) 24 Cal.4th 627, 636, the California Supreme Court concluded that a group of homeowners could not recover damages in negligence from the developer, contractor or subcontractors who built their homes, for existing construction defects that had not yet caused either property damage or personal injury. In reaching this conclusion, the Aas court explained that while "tort law provides a remedy for construction defects that cause property damage or personal injury" (Id. at p. 635), the ‘economic loss rule’ precludes recovery for damages such as ‘the difference between price paid and value received, and deviations from standards of quality that have not resulted in property damage or personal injury.’” (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1201 citing Aas, supra, at 636).

“In response to the holding in Aas, the Legislature enacted Civil Code section 895 et seq. (the Right to Repair Act or the Act).” (Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1201.) “The Act establishes a set of building standards pertaining to new residential construction, and provides homeowners with a cause of action against, among others, builders and individual product manufacturers for violation of the standards.” (Id. citing Secs. 896, 936). “The Act makes clear that upon a showing of violation of an applicable standard, a homeowner may recover economic losses from a builder without having to show that the violation caused property damage or personal injury.” (Id. citing Secs. 896, 942). “In such an instance, the Act abrogates the economic loss rule, thus legislatively superseding Aas.” (Id.)

Pleading Procedures and Requirements

The "Builder's Right to Repair Law" (Civil Code §895 et. seq.), effective 1/1/2003, establishes procedures and requirements with respect to construction defects involving homes and homeowners. The statutes established a statutory "pre-litigation procedure" that must be followed; but also gave developers the option of devising their own pre-litigation procedures - i.e. to contract for alternative non-adversarial pre-litigation procedures for resolving construction defects claims.

The Right to Repair Act (the “Act”) codifies a lengthy set of standards for asserting property damage claims arising out of the construction of individual dwellings. (Civ. Code §§ 895-945.5.) The Act creates a procedure for asserting construction defect claims and a statutory cause of action which replace common law litigation procedures and common law causes of action with respect to these claims. (McMillin Albany LLC v. Superior Court (2018) 4 Cal.5th 241, 251.) Various forms of economic loss are recoverable under the act, as is property damage resulting from construction defects. (Id. at 252; Civ. Code § 944.) “[F]or property damage, the Legislature replaced the common law methods of recovery with the new statutory scheme.” (Id. at 253.)

Civil Code §§910-938 sets out a non-adversarial pre-litigation procedure that a homeowner is required to follow prior to filing a lawsuit to recover on claims of construction defects. (Anders v. Superior Court of Stanislaus County (2011) 192 Cal.App.4th 579). The homeowner must give written notice to the builder of any claim that the builder violated Civ. Code §§896 and 897, describing the nature and location of the claimed violations (See also §910). The builder, in turn, must acknowledge receipt of the defect claims and make elections, inspections, offers to repair etc. within the statutory time periods. It appears that the Legislature intended that this type of disclosure and response would also apply to situations where the builder and the homeowner agreed to contractual procedures. (See Standard Pacific Corp. v. Superior Court (2009) 176 Cal. App. 4th 828.) As a result, where the ADR provisions are contractually based, each plaintiff homeowner needs to establish that he/she provided the builder with notice of the defects claimed to exist.

Avoiding Litigation

Civil Code section 912 identifies pre-litigation steps builders have a right take to address the problems claimed by plaintiffs and avoid litigation. To exercise this right, however, the builder must strictly comply with the provisions of the statute. Section 912, subdivision (i) states that “Any builder who fails to comply with any of these requirements within the time specified is not entitled to the protection of this chapter, and the homeowner is released from the requirements of this chapter and may proceed with the filing of an action, in which case the remaining chapters of this part shall continue to apply to the action.” (Civ. Code, Sec. 912.)

Section 915 provides:

“If a builder fails to acknowledge receipt of the notice of a claim within the time specified, elects not to go through the process set forth in this chapter, or fails to request an inspection within the time specified, or at the conclusion or cessation of an alternative non-adversarial proceeding, this chapter does not apply and the homeowner is released from the requirements of this chapter and may proceed with the filing of an action. However, the standards set forth in the other chapters of this title shall continue to apply to the action.”

(Civ. Code, Sec. 915.)